Higher earnings signal marketing recovery

First quarter earnings for the majority of advertising holding companies showed significant gains over last year's numbers, a clear sign that the advertising market has stabilized after the recent recession.

However, WPP Group reported revenues of $3.19 billion for the first quarter of 2010, a decline of 1.8% year-over-year. The agency holding company was the last of the five major holding companies to reveal financials for the quarter and the first to show an overall revenue decline.

WPP also revealed that revenues in constant currency were up 0.5% from the first quarter of last year and that "budget, profits and operating margins were all well ahead of last year, despite a similar level of severance," according to a statement.

The holding company said that its "direct and interactive networks of Wunderman, OgilvyOne and G2 all showed like-for-like growth, with the group's specialist digital companies, including Schematic, Blue Group and Quasar showing like-for-like growth of more than 9%."

Interpublic Group revealed first-quarter revenues of $1.34 billion, a 1.2% increase over the first quarter of 2009. However, the company saw a net loss of $71.5 million during the quarter, an improvement from the $73.9 million loss incurred last year. IPG's US revenue increased 2.8% from the year prior, reaching $803.1 million.

Dan Salmon, an analyst at BMO Capital Markets, said that the agencies' US business is driving the industry recovery.

"The US was first in the recession and it appears to be the first out," he said.

He added that the quarter is part of "the long term shift from mainstream advertising into direct and digital advertising."

"The US is a particularly strong jurisdiction when it comes to digital," he said. "But in terms of long-term effect on direct and digital, no one quarter is going to affect that."

Meanwhile, first-quarter revenues at Paris-based Publicis Groupe exceeded expectations with an 8.1% increase in revenue. Its quarterly organic growth, which omits currency fluctuations and acquisitions, was more than 3% year-over-year, on revenue of $1.55 billion. North America saw 4.8% organic growth for the quarter, while the US revenue increased 5.6%, excluding Razorfish. Europe lagged behind during the quarter, seeing a 1.5% decline in that timeframe.

"People in general just have more confidence in the market itself," said Bob Lord, global CEO of Razorfish. "We are now talking to clients about multiple-year plans vs. six-month plans. Ad dollars are being shored up, and they are asking us to do a lot more creative and experimental things in the digital space than before."

Fellow France-based holding company Havas saw $441 million in revenue during the first quarter of 2010, a 1.4% increase year over year. It also reported overall 5.2% first quarter revenue growth in North America after seeing a 9.2% decline a year ago. New business for the quarter brought in $764 million, according to the company.

Omnicom Group, which released first-quarter 2010 earnings on April 20, reported a worldwide revenue increase of 6.3% year-over-year to $2.92 billion. Domestic revenue increased 3.9% in the first quarter to $1.6 billion, compared with the same period in 2009. Net Q1 income, however, decreased 0.7% to $163.4 million.

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